An interesting interview with the head of Sun Edison India & Asia made me write about YieldCos.
For those looking at profiting from the growth of the solar energy sector, you can now look at investing in long term assets and getting attractive dividends through the concept of YieldCos. These yieldcos have become popular in the US in the last few years, and could be available in other countries, if not as yieldcos, as some regional versions.
YieldCos are entities created by hiving off operating assets with long-term income visibility for the purpose of giving dividend yields to investors. These asset-owning vehicles give public an opportunity to invest and receive dividend yield. The attraction of course is that the assets are all de-risked as they are all operational and hence, there is no construction risk or regulatory risk.You thus are investing in assets that can provide very low risk cash flows for as long as 25 years.
And as the Sun Edison honcho explains, the yields could grow to become quite attractive as the size of the asset portfolio grows. This could be achieved by optimal use of debt to grow the asset and provide increased returns. Of course, the attractiveness of debt as an instrument will depend on the region. For countries such as India with high interest rates, it might not make sense to increase the assets in India through debt from India, but these could be raised from international markets.
But overall, you get the idea. As an investor, you get attractive dividends long term by investing in RE assets.